IN OTHER WORDS...

By Oren Rawls

Published December 12, 2003, issue of December 12, 2003.
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Prescription for Disaster: “While much of the nation has been following the deliberations in Congress over a Medicare drug benefit, a quiet revolution has been taking place in the way benefits are managed for the 200 million Americans who already have insurance for prescription drugs,” Cindy Parks Thomas announces in the December 4 issue of the venerable New England Journal of Medicine.

Gone, at least for the most part, are the days when those with insurance simply forked over a $5 co-payment to “take two and call me in the morning.” Today, nearly two-thirds of prescription drug plans have adopted “three-tier formularies,” under which enrollees usually pay $10 for generic drugs, $15 for preferred or low-cost brand-name drugs and $25 or more for non-preferred or expensive brand-name drugs.

In theory, incentive-based formularies encourage the insured to opt for lower-cost prescription drugs, cutting costs for health care plans that can then be passed on to the consumer. The only problem with the theory, writes Thomas, co-director of the Prescription Drug Analysis Group at Brandeis University’s Schneider Institute for Health Policy, is that it’s bunk.

“Researchers consistently report that regardless of the particular details, incentive-based formularies lead to higher out-of-pocket costs to consumers and to some patients’ going without prescription drugs,” she asserts. “The extent to which total savings are passed on to employers or consumers are largely unknown and remain highly guarded industry secrets.”

Thomas’s claim is backed up by research conducted by a team of health care professionals led by Haiden Huskamp, an assistant professor of health economics at Harvard Medical School; his team’s findings are presented in a separate article in the same issue. The article examines the effects of incentive-based formularies on prescription-drug utilization and spending. The authors draw cautionary conclusions that stand in marked contrast to the unabashed optimism with which President Bush this week signed into law legislation giving the elderly prescription drug coverage under Medicare.

“Different changes in formulary administration may have dramatically different effects on utilization and spending and may in some instances lead enrollees to discontinue therapy,” warns Huskamp. “The associated changes in copayments can substantially alter out-of-pocket spending by enrollees, the continuation of the use of medications and possibly the quality of care.”

Huskamp and his team found that when companies switched to a three-tier prescription drug plan, some workers simply stopped filling their prescriptions. Such formularies, the researchers found, particularly affected those with lower incomes or chronic diseases.

“When patients either switch medications or discontinue therapy, are they merely skipping therapy of marginal value, or are they forgoing treatment that is medically necessary?” Thomas asks. “The patient must determine which medications are crucial.”

A growing number of patients, according to a third article in the New England Journal of Medicine, have already determined that their health is too valuable to be left in the hands of the American pharmaceutical industry.

“In a grass-roots movement that has swelled to a stampede over the past several years, U.S. citizens are heading to Canada to buy cheaper prescription drugs,” reports Dr. Abigail Zuger, a correspondent for the medical journal. “They are crossing the border in person, by telephone, by fax and by modem, in numbers estimated at a million or more.”

According to research by Canada’s federal Patented Medicine Prices Review Board, prices of patented prescription drugs are, on average, 67% higher in the United States than in Canada. America’s neighbor to the north ties prices for new medications not only to the going rate for drugs already on the market, but also to the cost of other consumer goods.

Doctors fielding questions from patients about the legality and safety of filling prescriptions through Canadian outlets, Zuger cautions, may find themselves at a loss for answers. Health care providers are likely to face similar dilemmas concerning queries over incentive-based formularies, particularly in regard to Bush’s recently passed overhaul of Medicare. What is clear to many, though, is that the American health care system is sick — and in need of a second opinion.

“When it comes to efforts to understand the effect of formulary design on the utilization of and spending on drugs, the devil is in the details,” Huskamp diagnoses. “As three-tier formularies become increasingly prevalent, we need much greater knowledge about these details in order to reap the advantages in cost savings without causing deleterious consequences for patients.”






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